TMI Blog2023 (9) TMI 1264X X X X Extracts X X X X X X X X Extracts X X X X ..... co-relation between the product exported and the product imported is required, and this is the uniqueness of the scheme. It was also pointed out by the learned Advocate and we agree with the proposition that impugned Customs Notification No. 19/2015 was under challenge and that the Hon ble Allahabad High Court in SACHIN PANDEY VERSUS U.O.I. THRU. SECY. MINISTRY OF COMMERCE INDUSTRIES AND ORS. [ 2019 (10) TMI 1057 - ALLAHABAD HIGH COURT] upheld non-correlation as one the feature of the DFIA Scheme. To the extent a particular material is capable of use even in any industry due to new patented or innovations in technology, the same shall be permitted to be imported against export of any specified material. It will be advisable to approach and decide the issue by the adjudicating authority keeping in mind that the DFIA Scheme unlike some other export scheme in the past which required some kind of a correlation in Tariff Heading does not require so as per various judicial pronouncements as well as by the application of the relevant notification - While the legislative purpose and intent of policy makers is not required to be looked into for interpreting any notification, it can be broa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, appellants have filed the present appeal. 2.1 Appellant during the course of hearing made following submissions: Lithium Ion Cells find use as Automotive Battery in Agricultural Tractors and are therefore covered by the description of Automotive Battery given in the said DFIA which are issued against the export of Agricultural Tractors: It is evident from the following material that Lithium Ion Cells find use in Agricultural Tractors: a) Technical Opinion dated 31-03-2023 given by Indian Institute of Technology (IIT), Kharagpur. As per the said technical opinion, EV batteries are typically made up of multiple rechargeable lithium-ion cells connected together to form the battery pack and Electrical Agricultural Tractors are commercially available which use Lithium Ion, b) Brochure of a manufacturer by the name Battrixx downloaded from website https://www.battrixx.com/e-electric-tractor-lithium- ion-batterypacks. php. As per this Brochure Lithium Ion Battery packs are used in Electric Tractors, c) Brochure relating to Sonalika Tiger Electric Tractor downloaded from website https://retroev.in/overview.php?id=480 type=Tractor 2.2 It is thus clear that Lithium Ion Cells find use as A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that Pop Corn was covered by the DFIA and eligible for the exemption. c) VKC Nuts P. Ltd v CC-2020 (12) TMI 326: In this decision the DFIA was issued for import of Fruit/ Food Flavour/ Dietary Fibre against export of Biscuits and the goods imported were Inshell Walnuts . This Hon'ble Tribunal held based on technical opinion that Walnuts are capable of use in Biscuits as source of dietary fibre and are therefore covered by the DFIA and eligible for the exemption and it is not necessary to show their actual use in the export product. d) Pace Ventures P. Ltd v CC-2019 (9) TMI 135: In this case, the DFIA was issued for import of Relevant Food Additives against export of Vegetable Pickles and for import of Flavouring agent against export of Biscuits and the goods imported were Green Cardamom . It was held that Green Cardamom was capable of use as Food additive in Vegetable Pickles and as Flavouring agent in Biscuits and therefore covered by the description given in the DFIA and it is not necessary to establish actual use. e) Uniborne Food Ingredients LLP v CC-2022 (3) TMI 1002- CESTAT-AHMD: In this decision the Hon'ble Tribunal has held that if the imported goods answer the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.6 I find that the appellant have filed Bill of Entry No. 4965904 dated 09.03.2023 for clearance of sought clearance of imported goods namely, 'Lithium Ion Cells against description of Automotive Battery against transferable DFIAS issued against export of Agricultural Tractors issued as per SION C-969. The relevant entry for SION C-969 is reproduced as under: 5.7 I find that the appellant, in the present appeal, have sought to contest the observations of the assessing officer relying upon the judicial pronouncements of various higher appellate forum. Appellant have submitted that the adjudicating authority has erred in holding that DFIA cannot be extended on the ground that ITC (HS) mentioned in the import documents differs from ITC (HS) mentioned in DFIA against Automotive Battery . In support of their contention, they have relied upon the judgment of Hon'ble Tribunal, Ahmedabad in case of M/s Pace Venture Pvt. Ltd. Vs. Commissioner of Customs, Ahmedabad [Final Order No. A/11615/2019 dated 30.08.2019] wherein Hon'ble Tribunal has observed as under: 9. As regard the reason for denial that CTH is not mentioned in the Licence, we take support from the judgment in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alternative input, unless the name of the specific input together with quantity (which has been used in manufacturing the export product] gets indicated lendorsed in the relevant shipping bill and these inputs, so endorsed, within quantity specified and match the description in the relevant bill of entry, the concerned authorization will not be redeemed. In words, the name/description of the input used (or to be used) in the Authorization must match exactly with the name/description endorsed in the shipping bill. It is the contention of the appellant that Automotive Battery is a specific term so as to take the imported goods out of the purview of para 4.12 of the FTP. However, the appellant have not submitted any evidence in support of the contention that the Automotive Battery is a specific term. In my considered view, Automotive Battery is a generic term and that Lithium Ion Cell can be one of the form of Automotive battery along with Lead-acid, Nickelcadmium, Nickel-metal hydride, etc as mentioned under CTH 8507 of the Customs Tariff Act, 1975. Therefore, in my considered view, the appellant needs to satisfy the requirement of Para 4.12(i) of the FTP for claiming exemption unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduct of Biscuits, the imported goods include Flavouring Agent therefore, there is no doubt that the Green Cardamom is used as Flavouring Agent in the manufacture of Biscuits. 5.13 Hon'ble Tribunal further observed that: 8. As regard issue raised by the department that specific name of Green Cardamom is not mentioned, we find that once the imported goods is covered under broad description in Licence and if any item covered in such broad description will covered. If Revenue's contention regarding specific product being not covered is accepted, then since Licence does not mention specific name of any goods, no any goods can be allowed to be imported under the said Licence, which is not the intention of DGFT in issuance of Licence. Hence the Revenue's view in this regard has no legs to stand. The identical issue was raised in the case of Unibourne Food Ingredients LLP (Supra). wherein this Tribunal has given following observation: 15. Now coming to the merits of the case, the issue involved is on a narrow compass. In the instant case, the goods imported are Apple Juice Concentrate . The exemption is sought under Exemption Notification No. 98/2009-Cus., dated 11-9-2009 by p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avor/dietary fibre. This has been held in appellant's own case by the Hon'ble CESTATMumbai in Final Order No.A/85730/2020 dated 11.09.2020. Moreover, as per the custom's lab report dated 08.08.2018 and various technical opinions as discussed above, the Inshell Walnut is used as flavor or fruit/nut or dietary fibre in the manufacture of biscuits/cookies and confectionary. Therefore, there is no dispute that inshell walnut is correctly covered under the description of goods i.e. fruit/flavour/dietary fibre as mentioned in the annexures annexed along with DFIA Scheme as well as specified in SION. 5.15 In the above decisions, I find that Hon'ble Tribunals have considered the provisions of Para 4.12 of the FTP and have taken a view that as long as the import goods are covered by the description given in the DFIA licence, the benefit of exemption cannot be denied. 5.16 In this regard, it is pertinent to refer to the decision of Hon'ble High Court of Judicature at Bombay in case of M/s Shah Nanji Nagsi Exports Pvt. Ltd., Vs UOI [2019(367)ELT 335(BOM.)] wherein Hon'ble High Court has discussed requirement of DFIA scheme in details. In this case Hon'ble High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, only BOPP film required for manufacture of Self Adhesive Tape will be allowed and not those, which are required as packing material. Bare Perusal of Note 1 indicates that, there is no actual user condition but the input must be capable for use of export product. In absence of any specific word, the only requirement appears to be of capability of the input product to manufacture the export goods and no necessity to actually use the same. The plain reading of note-1 nowhere conveys that there is actual user condition. 5.17 Hon'ble High Court in the same judgment further observed that 28. The petitioner has imported maize which is capable of being used in the manufacturing of export goods namely maize starch powder. There is no actual user condition so as to restrict right of petitioner to import maize. So long as the export goods and the import item corresponds to the description given in the SION, it cannot be held to be invalid by adding something else which is not in the policy. 5.18 In view of the various judicial pronouncement as discussed above, the ratio that emerges is that the imported goods should be covered by the description of input mentioned in the DFAI licence s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50 km, although some of them can travel as far as 500 km with just one charge. An example of this type of vehicle is the Nissan Leaf[7], which is 100% electric and it currently provides a 62 KWh battery that allows users to have an autonomy of 360 km. EV Batteries are typically made up of multiple rechargeable lithium-ion cells connected together to form the battery pack. The following may be noted while considering EV for agricultural purposes: a. Agricultural tractors are also vehicles but of the off-road category, since they are mainly deployed in agricultural fields. b. EV batteries have been used for propulsion of vehicles of a variety of sizes and power from two wheelers to buses and trucks. c. Electric Agricultural Tractors are available in commercial market in India that use Li-ion batteries (for example the Sonalika Tiger Electric tractors uses a 25.5 kWh battery) d. LIBS have been used in numerous EVs (for example in the car Tata Nexon EV and in the bus Tata Starbus EV) From the above, it can be seen that Electric Batteries (EV) are Automotive Batteries used Buses /cars etc. are also capable of being used in Agricultural Tractors after Tullable technical modifications. 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies. (i) The Hon ble Bombay High Court (Nagpur Bench) in its order and judgement dated 29.03.2019 in the case of Shah Nanji Nagsi Exports Pvt. Ltd., Vs. UOI reported in 2019 (367) ELT 335 (Bom) . (ii) The Order Judgement dated 07.11.2022 passed by the Hon ble Tripura High Court concurring by the the Judgement and order passed by the Hon ble Allahabad High Court in the case of Sachin Pandey Vs. UOI. (iii) The Hon ble Appellate Tribunal (Ahmedbad) reported 2022(381) ELT 810 (Tri-Ahd) in the case of Unibourne Food Ingredients LLP Vs. Commissioner of Customs, Mundra , (iv) Hon ble Appellate Tribunal in the case of Pace Ventures Pvt. Ltd., Vs. Commissioner of Customs, Ahemdabad vide Final Order No. 1/11615/2019 dated 30.08.2019. (v) Technical Opinion of IIT, Karagpur on EV battery dated 31.03.2023 has opined that EV Batteries (EV) are Automotive Batteries used in Buses/Cars are also capable of being used in Agricultural Tractors after suitable technical Modification. 2.8 It is submitted that the product description mentioned in the DFIA under Serial No.2 is Automotive Battery is a specific term and therefore the provision of Para 4.12(i) has no application. Similarly it is submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ELT 0037(Guj.) is squarely covered in the present case . 2.13 It is submitted that there is no actual user condition existing under DFIA Scheme as held by the Hon ble Bombay High Court in the case of Shah Nanji Nagsi Exports Pvt. Ltd., Vs. UOI. The ratio of the said judgement has been followed by this Tribunal in the case of Unibourne Food Ingredients. 2.14 As regards the mismatch of ITC (HS) Numbers of goods under import and ITC (HS) Number mentioned in the DFIA, as held by this Hon ble Appellate Tribunal in the case of Unibourne Food Ingredients LLP Vs. Commissioner of Customs , Mundra reported 2022(381) ELT 810 (Tri- Ahd) under Para 14 which is reproduced below:- .. That for claiming DFIA benefit, under Notification No. 19 of 2015, the appellant is only required to satisfy the description, value and quantity mentioned in the DFIA. The imported goods are covered within the description, value and quantity of the DFIA. Therefore the submission that the appellant has not satisfied with the conditions of Notification is not correct. There is no such condition either in the policy or in the procedure or in the Notification No. 19 of 2015 which stipulates that ITC (HS) No. is a criteri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Transferable DFIA cannot be permitted unless each of the following three essential conditions are satisfied:- (a) The technical specification/quality and characteristics of the imported goods are specifically declared in the shipping bills by the exporter; (b) The imported goods are actually used as inputs in manufacture of export product, and (c) The imported goods are not merely alternative inputs or goods capable of using the export product. 2.19 It is submitted vide its Order and Judgement dated 07.11.2022 , the Hon ble Tripura High Court inter alia held that under custom notification no. 19 of 2015 that the importability of actually used input under Transferable DFIA , would only apply in those cases where the imported goods are used in the resultant product. In the present case, the inputs used are domestically procured for manufacturing resultant product which is exported. Therefore it is not necessary for a Transferee importer to import only those inputs which are actually used in exported goods. 2.20 There is no Actual user condition mentioned against any of the inputs mentioned in the aforementioned DFIA s. It is submitted that as per provision of Para 4.27 (iv) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ground that custom Notification No. 19/2015 Customs dated 01.04.2015 dealing with the scheme does not permit benefit of Lithium Ion Cells against description of automotive batteries for use in tractors as a material permitted to be imported under Foreign Trade policy shall be of specific names description or quantity respectively as a material use in export of resultant product. Regarding the placement of reliance by Learned AR on the decision of Hon ble Supreme Court in the matter of C.C Mumbai Vs. M/s.Dilip Kumar Company as reported in 2018 (361) ELT 577 (S.C). We find that there is no ambiguity in the notification of which the benefit could be given to the department while interpreting the same. The department was initially of the view that Lithium Ion battery has not been shown to have been used in exported tractors and that party not having done so was disentitled from the benefit of exemption notification which are construable strictly. We find that generally exemption notification is to be construed strictly but exemption notification dealing with export benefit schemes are liable to be liberally construed. Further a notification at threshold while deciding applicability i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... product so long as imported product was capable of being used under description of license. Actual use in export product was also considered as relevant and it sufficed if capability of being used by the product imported existed. Further in Unibourne Food Ingredients LLP delivered vide Final Order No. A/10255/2022 decided on 17.03.022 this Bench while dealing with duty free benefits to vital Wheat Gluten flour under Custom Notification No. 19/2015, (which pertains to DFIA Scheme), considered non mention of Wheat Gluten in DFIA no bar when wheat flour description existed in the documents. The Bench held the appellant is only required to satisfy that the product description mentioned in DFIA, was capable of use and there stipulation in Notification 19/2015 that material should be actually used in export product did not exist. During course of its decision, the bench relied upon the decision of Commissioner of Customs Calcutta Vs. G.C Jain as reported in 2011 (269) ELT 307 (S.C) to hold that the term used as material required for manufacture of export products would encompass such items also which are not only directly used or but are usable as such in the manufacturing process of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al dictionaries, melamine can be used for tanning leather without making a condensate first. It is clear that Melamine and formaldehyde can be simultaneously used on the leather for tanning instead of making a condensate first. Since the expert opinion is contrary to the published literature the appellant sought cross-examination of the expert. The Adjudicating Authority issued letters but the expert did not appear. The Adjudicating Authority could have issued summons to him to force his appearance, but he did not do so. Instead, he chose to rely on the expert opinion, which was contrary to the other published scientific literature produced by the appellant and confirmed the demand. In our considered view, such an approach cannot be sustained. Learned Authorized Representative has argued that the expert opinion by Government Chemist cannot be brushed aside. We agree. However, if the expert opinion is contrary to some other technical literature and when the assessee seeks a cross-examination of the expert it must be provided before the expert's report can be relied upon. On cross-examination, perhaps, there would be better clarity as to how the expert held a view contrary to oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ify for imports under the licence or not and G.C. Jain answered in affirmative and this ratio applies in this case as well. 26. Another ground on which the demand was confirmed is that the HSN headings of Syntan and HSN heading of Melamine are different. We find from the standard input/output norms published by the DGFT and also from the licence that the HSN codes are not specified when allowing imports in the licence and only the materials are indicated. So long as the goods match the description, they can be imported. The customs officers cannot add conditions to licence and insist that the inputs have to fall under a particular HSN. 27. Learned Authorized Representative has placed reliance on the order of the Tribunal in the case of Balaji Action Buildwell. We find that before the Tribunal in that case was only the expert opinion of CLRI, Chennai which stated as follows Melamine cannot be used, as such, in leather processing as Syntan . It does not appear from the order that any of the technical literature contrary to this opinion of CLRI were produced in that case by appellants before the Tribunal. It is not recorded that Melamine can be used directly, as such, on leather as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t it is not the actual use but the possibility of use in a given technology that has to be seen while permitting the benefit under DFIA Scheme. While deciding the possibility of use, department can always look into some technical and other opinions to come to the conclusion that with advent of technology certain items have become capable of use in particular innovative technology even when it was not so earlier. 3.5 To the extent a particular material is capable of use even in any industry due to new patented or innovations in technology, the same shall be permitted to be imported against export of any specified material. It will be advisable to approach and decide the issue by the adjudicating authority keeping in mind that the DFIA Scheme unlike some other export scheme in the past which required some kind of a correlation in Tariff Heading does not require so as per various judicial pronouncements as well as by the application of the relevant notification. While the legislative purpose and intent of policy makers is not required to be looked into for interpreting any notification, it can be broadly analysed that if at any stage policy makers want to encourage innovation and adve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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